Clinton Warns of Recession Risk in Rapid Deficit Cuts

Faced with continuing congressional pressure to deepen his proposed cuts in government spending, President Clinton warned Tuesday that attempts to reduce the federal deficit too rapidly could damage the economic recovery.

His own economic package, he said at a press conference, would “get our deficit under control . . . but we want to do it at a moderate pace so that we don’t throw the United States into recession.”

Clinton’s warning came amid a flurry of meetings with members of Congress as the President and his aides tried to reach an accommodation that would smooth passage of his proposed spending cuts and tax increases while preserving his plans to spend more money on programs that he favors.

By day’s end, both sides appeared to have moved closer to reaching such a deal--one that could include deficit reductions notably larger than those Clinton first proposed--but a final agreement continued to elude them.

“There is a shaky coalition that’s being developed and I would emphasize being developed,” said Sen. John B. Breaux (D-La.), a leading Clinton ally in the Senate.

House Budget Committee leaders have proposed deficit reductions of roughly $60 billion more than Clinton has proposed, whereas a Senate plan would put the reductions at $90 billion more.

Meanwhile, part of Clinton’s economic package cleared an important hurdle as the House Appropriations Committee, in a party-line vote, approved the first part of Clinton’s short-term economic stimulus package--$16.5 billion in spending for the current year to stimulate jobs in high-unemployment areas, such as Los Angeles.

Clinton has asked for quick passage of the stimulus plan, part of which would pay for summer jobs for unemployed youths and therefore would be useless if not enacted soon. House leaders hope to bring the stimulus bill to a vote sometime next week but conceded that they may face pressure from conservative Democrats to scale down or delay the package.

The situation is more difficult in the Senate, where the Democratic majority is more slender and where conservatives have more influence. Late Tuesday evening, Clinton met for 80 minutes with a group of 15 Democratic senators, most of them moderates or conservatives, who told him that he probably cannot muster the votes to pass the stimulus package unless some way can be found to allow Congress to first take a clear vote on cutting overall spending.

The senators offered a variety of options for resolving that problem but came to no final resolution, participants said.

Although passage of most of Clinton’s economic package still appears likely, the day’s events demonstrated the difficulty of maneuvering the plan through Congress. Having raised public interest in cutting the deficit, Clinton now faces the prospect that deficit-cutting fever could endanger the new spending he favors--money for programs such as high technology, improvements in the nation’s roads and bridges, education and job training.

Clinton’s warnings about cutting too much underlined that concern. But his remarks also reflected warnings from Administration experts that the economy--much like a patient who has grown dependent on a dangerous drug--must be weaned off deficits cautiously. In the long run, deficits weaken the economy, but in the short term, the economists warn, a rapid deficit reduction would increase unemployment and potentially throw the nation back into recession.

“People should be sensitive to” the contractive effects of any plan that would reduce the deficit, said Laura d’Andrea Tyson, who chairs the White House Council of Economic Advisers. “You have to keep the end in mind, which is to improve economic growth, not deficit reduction for its own sake.”

Many members of Congress, however, have been feeling strong pressure from voters to meet deficit-reduction goals. “What’s really fueling the President’s support among people is not any new spending programs but the promise of deficit reduction,” Sen. David L. Boren (D-Okla.) said after the White House meeting.

Another crucial conservative vote, Sen. J. James Exon (D-Neb.), sounded a similar note. “We’re not enthusiastic about the total stimulus package,” he said.

The changes desired by the Senate conservatives, and some in the House, are twofold: deeper cuts and a vote that would lock those cuts into place before they are asked to vote on Clinton’s stimulus package.

Earlier in the process, White House officials and congressional leaders had hoped to meet that second demand by scheduling a vote on a budget resolution--an overall blueprint for spending cuts--before voting on the stimulus package. But that move, Boren said, will not gain Clinton the votes he needs because members of Congress cannot credibly tell their constituents that a budget resolution alone actually guarantees any cuts.

The senators presented Clinton with several options, Boren said, including approval of only part of the stimulus package or some move that would allow the new money to be spent only after overall budget cuts have been made.

The difficulties in the Senate could be seen as the Senate Budget Committee, in the first of two days of deliberations on a budget plan, fell into harsh and rancorous partisan bickering.

Republicans complained long and loud that the plan does not cut spending enough, raises too much in taxes and--in the words of Sen. Don Nickles (R-Okla.)--”cuts and guts and decimates defense.”

Sen. Ernest F. Hollings (D-S.C.) mocked his GOP colleagues who advocate spending cuts while trying to preserve costly programs, such as NASA’s proposed space station.

“We can afford $15 billion so they can walk safely in space but we can’t find the money for cities so they can walk safely in Los Angeles,” he said.

Times staff writer William J. Eaton contributed to this story.

Computing Clinton’s Cuts

Here is how President’s economic package would affect the deficit:

THE ECONOMIC PLAN Spending cuts: -$247 billion Tax increases: -246 billion Stimulus plan: +169 billion Total cut: -$325 billion *

IMPACT ON DEFICIT Deficit (accumulated 1994-97, (with no change in policy): $1.241 trillion Minus plan: -$325 billion Deficit (under Clinton plan): $916 billion* * Numbers do not add up because of rounding